True Grit Breathes Life Into the Western

True Grit is a western that owes little to John Ford or Howard Hawks. It’s in a class by itself. Forget the John Wayne version. Joel and Ethan Coen, the directors and writers, created an original vision based on the novel by Charles Portis.

It’s a simple story of a 14-year old girl, Mattie Ross (played by the astonishing Hailee Steinfeld) determined to bring her father’s killer Tom Chaney (played by Josh Brolin) to justice. She asked the sheriff for the best bounty hunter in the town. But the sheriff’s idea of best wasn’t hers. She wanted the meanest and toughest. He turned out to be Rooster (Rubin) Cogburn, played by Jeff Bridges to perfection. We meet him in the outhouse outside a bar when Maddie is determined to hire him. He’s crusty and blunt, telling her to get the hell away. His old, tired and grizzly act is just that: an act. He spars with her and protects her. Bridges has a way with the almost artificial language that speaks of its era. He chews on the dialogue like a juicy bone.

Mattie Ross was tough as nails. She was tart tongued with a withering response for everyone. She negotiated straight on with all the older men she meets, whether it’s restitution for her father’s property or for Rooster Cogburn’s help. When Cogburn left her behind to find Tom Chaney, she galloped after him, called him a thief and demanded her money back.

There are elegiac moments worthy of the best of Ford’s Monument Valley pics. When Mattie is bitten by a rattlesnake, Rooster takes her on a ride on her beloved black horse through the glowing landscape of the west, with the deep horizon and multi-hued sky bearing down on the riders (cinematography by Roger Deakins).

To catch up with Rooster after he leaves without her, she gallops into the water up to her horse’s neck. The climatic shootout between the gang harboring Chaney and Cogburn was thrilling. Bridges charged towards four adversaries, guns in each hand with the bridle in his mouth. Two-fisted, deadly accurate shooting. Matt Damon as La Boeuf was a bit of a goodie two shoes as a straight arrow Texas Ranger. Josh Brolin as Tom Chaney struck the right note of resignation as if he’s thinking, what next can possibly happen to me.

An interesting point is how civilized, almost courteously, the rivals behaved toward each other even though there was grisly violence. When Lucky Ned Pepper (played by Barry Pepper) grabs Mattie as a hostage, he treats her as an equal, listening patiently to her story and charging Chaney to keep her safe.

Jeff Bridges and Hallie Steinfeld are an odd couple made in Western heaven.

The Aftermath of My Trip to Washington (not Ms. Smith Goes to Washington)

Ever since I attended a rally in Washington at the end of October, my life has been altered considerably, and not for the better. People treat me like trash in my home town of 30 years. An irate patron called me out in my local Starbucks who demanded that I leave the store, the reasons for which remain unclear.

I wrote a detailed 9 page essay on the experiences I had leading up to the trip, the trip itself and its lengthy aftermath of exile. Here are some excerpts from the story:

I wanted to see some of Washington before I went to the rally. I didn’t think I’d get too close to the rally, anyway. I was dressed in what I thought was an innocuous rock and roll outfit, leather and lace, trying to imitate the Stones. But at this point in history, the Stones are too dangerous. Even I felt that as I put on the clothes, the leather vest I got at Trash and Vaudeville, the jewelry from Chico’s, and the leather jacket. I stuck out. No shrinking violet.

I ended up at the “VIP Tent” of “The Rave” of the rally, where I was given a wrist band and encouraged to partake of consumer goods (which now, in the light of day, I see were sponsors of the rally).

But I wasn’t a sponsor of the rally. I was unwittingly enrolled as its "colorful character", a role I didn’t know I was playing and it was extremely taxing. After absorbing some more negative energy from the crowd even within the “VIP Area” while trying to dance to some great bands, I wandered off to try to find Union Station and get the hell back to NY. I already missed my 8pm train and had no hotel room. No one could or would help me. I approached many people on the street. It wasn’t funny anymore.

Needless to say, I was poorly treated and very frightened. The rest of the essay will be available soon. To whomever let me go “viral” and spread rumors about my “nastiness”, there is a special place reserved for you and it’s not in the skybox at Yankee Stadium.

The Golden Globes Show Was Very Moving

I really enjoyed watching the Golden Globes last night on NBC. The actors and actresses were all very glamorous. I have no quarrel with their fashions. They looked great.

Ricky Gervais was a great MC and very funny, though perhaps considered caustic by delicate sensibilities.

The Social Network was the big winner. It won best drama and top prizes for both David Fincher, great director of (among others) Seven, Fight Club and Zodiac, and Aaron Sorkin, the wonderful showrunner/writer emeritus of the West Wing, which dealt with matters of politics and power very deftly.

I was moved by his acceptance speech. He praised the founder of Facebook and also gave a ringing shoutout to all the mothers, sisters and daughters out there that it was cool to be smart. That's the code I live by. Good to hear it on such a platform.

Why the Words "Blood Libel" Should Be Taken Seriously

It should always be taken seriously when people use code words like "blood libel". These are words laden with meaning for the Jewish people, as they refer to anti-semitic beliefs that date from medieval times that were used to subjugate and (possibly) justify the holocaust.

There is another strong piece of anti-semitic literature called "The Protocols of the Elders of Zion." This is a Russian hoax/forgery drummed up in the late 19th century that purported to be the blueprint of the Zionist takeover of the world. It is the worst kind of hatemongering cloaked in wolves' clothing. It was used to justify pogroms and the rise and development of the Third Reich. It is still extremely popular today in certain circles.

If you want a brilliant, graphic re-telling of the "Protocols" and its origins, read Will Eisner's (the creator of The Spirit, among other things) "The Plot". It was his last great work and one he'd prepared for all his life.

I wrote the following post back in September while in California reading the news from NY. I thought it would be appropriate to remind people of the power of hate speech:

This country is headed down an ominous path. Contrast two stories in the NYT yesterday which showed the chilling effect of what happens when a country decides people who practice a certain religion are a cancer that must be cut out of the body politic.

One article told the story of German child psychiatrist Hans Keilson, a Jew who fled Germany in 1936 after his first novel was banned by the Nazis. He had watched the brownshirts grow in power but never thought he'd be a target:

"I was so German," he said. "I thought they would not do this to me. I am one of them." But he soon realized that Germans no longer recognized him as part of themselves. He remembered a literature class in which he read a poem by Heinrich Heine, who was born Jewish. The class president stood up and said: "We refused to talk about this. This is not a German poem."

The same tactics and even the same language are being used against Americans who practice Islam. People have been worshipping at a tiny mosque in upstate New York for the last 30 years. It's housed unobtrusively in a plain, unadorned building. Recently a pack of teenagers tried to hit the son of one of the mosque's founding members. One of them fired a shotgun in the air. A few days before that, he'd driven by shouting anti-Muslim epithets.

The ancient (but still invoked) charge of blood libel, the belief by Christians that Jews drain the blood of Christian children for their religious rituals, was echoed by this teen's words. He heard it was a cult house where people drank blood. He added as justification, "How many real religious places do you see that do not have a sign stating that it's a religious place?"

Right now it's mainstream discourse in America to question whether a citizen practicing a certain religion is a loyal American. In fact, the atmosphere is poisonous with accusations that we have terrorists within our midst (especially the President) with a secret agenda to take over.

This is not new in our history. Senator Joseph McCarthy made his bones on accusations that the American government was infiltrated by American communists. JFK had to contend with accusations that his loyalty was to the Pope in Rome. (Ironically, Kennedy was one of the few Democrats who never denounced McCarthy. McCarthy was also a Catholic and extremely influential.)

The amount of hatred and vituperation against Muslim Americans is reminiscent of Dr. Keilson's story. The desire to cleanse America of a foreign toxin in order to purify it has echoes in the darkest times of civilized society.

Unless we have some pushback from powerful voices, this unchecked aggression will destroy people. The hordes will pour forth strippping the flesh from the bones of what's left of the rule of law. How can such ignorant hatred drive American policy without being called out?

"Have you no sense of decency? Have you left no sense of decency?"--U.S. Army's chief legal counsel Joseph Welch to Senator Joseph McCarthy.

Casino Jack: Spacey Is A Winner As Abramoff

I walked into Casino Jack , directed by the late George Hickenlooper (he just passed away in October 2010), thinking it would be a straightforward retelling of the Jack Abrahamoff story, disgraced lobbyist, and the events and people caught in his web. Double Academy-Award winner Kevin Spacey was playing Jack, so I knew he’d be charismatic and charming.

But a strange thing happened. I wanted to hate Jack on principle: I’m a progressive, he’s a Republican lobbyist with no morals who was instrumental in the Florida recount and the smearing of John McCain in South Carolina during the 2000 campaign for Republican nominee. I believe lobbying is bribery writ large; Abramoff is the super lobbyist.

But I couldn’t. The way Spacey played Abramoff, he was sympathetic even at his wormiest—wheeling and dealing with the Native American tribes about casinos they wanted to build (hence the name) while he was ripping them off at jacked-up prices. Spacey starts off the movie in front of a mirror telling himself what’s really important: that he’s Jack Abramoff and he works out every day. The script, by Norman Snider, turned Abramoff from a headline into flesh-and-blood, however corrupt.

The movie shows the wreckage Abramoff left behind, embodied by Barry Sprague (Graham Greene), a highly respected Native American eminence who was steamrolled by Jack when he got in the way of his huge fees. But Jack never wavered in his belief that he provided access to power and greased the wheels of our democracy. He was doing God’s work.

Both Jack and Michael Scanlon (Barry Pepper), his protege with even less of a conscience than his mentor, had good women with sense. Jack’s wife Pam (Kelly Preston) questioned him about late mortgage payments while he’s building an empire of restaurants (kosher and non), orthodox school for boys and buying a floating casino. Michael’s fiancé Emily (Rachelle Lefevre) was appalled when Michael bought a run-down DuPont mansion. She also marched decisively into FBI headquarters armed with details on their schemes when she found out Michael was cheating on her.

The floating casino deal brings in Jon Lovitz as Adam Kidan, who was a laugh riot as the owner of a bankrupt mattress company. Nothing fazes him except getting attacked with a ball point pen while being strangled. Watch him as he complains to Jack about his boredom while in a Miami hotel room with hot babes strewn about in their undies.

The movie’s farcical tone increases as Jack finds out that Lovitz had the Greek owner of the floating casino whacked while he shepherds one of his tribes through the White House to meet with the president. He also finds out his right-hand man Mike Scanlon (Barry Pepper) spilled the beans of their entire crooked operation to his fiancée because they “were going to be married,” as Scanlon cries his eyes out in the back of a limo.

Of course, the empire Abramoff built came crashing down and Abramoff, along with Tom DeLay, Bob Ney and various colleagues, are jailed. Spacey has a great moment at the end in front of a Congressional hearing as he defended himself against three felony charges in front of Congressmen whose coffers he had filled over the years. But did it really happen?

I have a weakness for people who love movies and Jack loved the movies. He quoted them to the distinct irritation of his various bosses. After disaster struck and he was facing years in prison, he flew to Paramount Studios to pitch a Bible epic like a latter day Cecil B. DeMille. He teaches screenwriting in prison. The man is indefatigable. He’ll be back. Watch yours.

Let Us Mourn for Representative Gabrielle Giffords & 6 Others Killed

This is a short post without editing. I mourn deeply for the violence and hatred in this country that has led to these assassinations. People cannot deny accountability for stirring up hatred for political gain, holding rallies where there are cries of "Lynch 'em" and worse.

If we choose to kill instead of engage in reasoned debate, then who are we as a society?

An example of how our culture devalues human life: the story on the front page of a paid subscription content provider from a media source they circulate put together 2 + 2 and got snake eyes.

I don't know who the writer was, but it's not at all funny to worry about death threats or to think your life is in danger, then find out too late you were right all the time. It doesn't feel good to be right about that.

God help us all.

Inception: Enter Its World And You May Never Want to Leave

In Inception, Christopher Nolan (The Dark Knight, Memento), who directs and writes the film, asks the question, “Are we living in a dream world or is it real? And which is more desirable?” The viewer can answer for himself as Inception plunges the audience into both worlds. The arena of Inception, a system containing the wild creations of its dreamers, grows more vivid, thrilling and tangible as the movie unfolds.

Leonardo DiCaprio plays Cobb, an expert extracter, someone who is able to enter the dream state of another in order to steal confidential information from their subconscious. He works mainly corporate espionage, until one of his targets, Saito (Ken Watanbe) hires him to do an inception. Instead of stealing another’s ideas, he is to implant one.

Cobb knows the power of ideas. In one of the opening scenes, he states that ideas are the most powerful invaders of humankind, impossible to forget and capable of growing. Di Caprio is utterly convincing as the master dreamer and leader, the one who has the power to guide the others through the maze of their dream states and get out safely. This is not an easy sell because Nolan is asking us to suspend our belief about how we comprehend reality.

The dangers of inception are clear. There isn’t just one level. To implant the idea, his team must go 3 levels down, to a dream within a dream within a dream, comprehending and dodging the obstacles of their target, Fischer, played by Cillian Murphy.

Nolan visualizes this world powerfully. It becomes increasingly harder to distinguish the dream world from the waking world. People are in danger. Revolutionaries, security forces and armies hunt them down. Ellen Page as the architect, Ariadne, conjures up an entire cathedral-like structure on top of existing buildings through which she and Cobb roam freely, breaking the laws of physics. It’s like a multi-dimensional M.C. Escher drawing.

Our willing suspension of belief is referred back to during the climactic scenes, where the team tries to guide Fisher through the deepest level of dream state so he can discover the implanted idea himself. Nolan cuts between Joseph Gordon-Levitt as Arthur, Cobb’s right hand man and a sober, level headed influence, as he battles Fischer’s security forces in zero gravity while the rest of the team squares off on snow-capped mountains dodging an avalanche while battling gun-toting adversaries. In “real time” the dreamers are packed in a van plunging off a bridge into slow motion.

Cobb is tormented by a secret sorrow. He cannot prevent his wife from entering his dream states and destroying his plans. Ariadne acts as the outsider, the one who questions Cobb’s obsession and tries to protect him and the group against it.

The cast is uniformly excellent, with Tom Hardy playing Eames, the wise-cracking master of disguise and Dileep Rao as Yusuf, the chemist charged with jolting the team from their self-induced comas and driving the van plunging off the bridge. But Christopher Nolan is the master, creating enrapturing scenes that make you pause as you try to answer the question I posed at the start of this review.

Massachusetts Supreme Judicial Court Rules In Favor of Foreclosed Homeowners

According to Gretchen Morgenson's article in The New York Times, the Massachusetts Supreme Judicial Court (the highest court in the state, and the first to apply such a broad-based ruling in foreclosure cases) voided the seizure of two properties by U.S. Bankcorp and Wells Fargo because they did not prove ownership before foreclosing on the property:

Instead, the banks had acquired the mortgages after they had begun foreclosure proceedings. The ruling on Friday upheld that position. Foreclosures are supposed to occur only when lenders can prove they own the note underlying the property.

For those of you (which includes almost everyone) who still believe that one bank services your mortgage, let me disabuse you of that notion. During the housing bubble, mortgages went through a process called securitization which theoretically reduced risk. Securitization also lengthened the chain of claims upon debt, increasing fees for each link in the chain: the loan originator, the bank which bundled thousands of mortgages together to create a derivative, the mortgage-backed security (MBS), the credit ratings agencies which slapped a seal of approval on the MBS (a triple-A rating, which was downgraded in a hurry when the banks could no longer sell the MBSs) and institutional investors like CALPERS who bought them.

The enormous sums of money made through the process of securitization must of clouded the self-regulatory minds of banks that bundled the mortgages:

As lenders and Wall Street firms bundled thousands of mortgage loans into securities, banks often failed to record each link in the chain of documents demonstrating ownership of a note and a property.

There have been claims of robo-signing and forged signatures.

Rest assured, although these banks did take over the plaintiffs' mortgages and presumably profited from them, their spokesmen claim they merely acted as trustees, go-betweens between the loan originator and the investors:

Vickee J. Adams, a Wells Fargo spokeswoman, said, "The loans at issue in the court's ruling were not originated, owned, serviced or foreclosed upon by Wells Fargo. As trustee of a securitized pool of loans, Wells Fargo expects the entities who service these loans to abide by all applicable state laws, including those laws that govern foreclosure sales."

Who takes the haircut? Who do you think?

The defendants asked the court to limit its ruling only to new foreclosures (by "new" I guess they mean ones they will begin tomorrow).

The court declined to do so, allowing foreclosure cases that have been completed to be reopened and brought under scrutiny.

High Technology Stalking

Progress in technology has always gone hand-in-hand with human progress. We behold miracles that enable us to make our lives easier and improve health and longevity: robots reminding hospital workers of steps they should take to reduce tragic errors or the capturing of terrorists in response to probable cause.

But there's a darker side to technology: high technology stalking, where the motives can be malevolent. The object is not crime fighting but power, control and possibly murderous intention over a helpless and/or unknowing victim. The worst part is that surveillance equipment can be so small and so easy to disguise that it may never be detected, and that the victim may be followed and endangered by the very tools the abuser uses as he/she plans to escape.

From The Minnesota Center Against Violence and Abuse in a study commissioned by Violence Against Women Online Project:

HIGH TECH STALKING: SOME METHODS

Small wireless high-resolution cameras can be hidden in smoke detectors, children's lamps, or behind a pin-sized hole in a wall, and can even be activated remotely.

GPS: a small chip in a wristband

In 2003, the Supreme Court of New Jersey found that a defendant's video surveillance of his estranged wife in her bedroom presented a prima facie case of stalking and harassment under the New Jersey Domestic Violence Act (H.E.S. v. J.C.S., 2003).

Ccleaner: "Scrubber" and "Washer" programs that claim to clear computer histories are ineffective if SpyWare is in use.

In addition to software programs, stalkers can use hardware devices called "Keystroke Loggers" that are inserted between the keyboard cable and the back of the computer. These tiny devices contain small hard drives that record every key typed, including all passwords, personal identification numbers (PIN), websites, and email.

More about this sort of surveillance in later posts.

Oscar Bait--Joan Rivers: A Piece of Work

Cross-posted on imdbpro.com

There were a lot of lists of the Top Ten Films of 2010 but one film was conspicuously absent--Joan Rivers: A Piece of Work. Maybe because it was a documentary. It’s 85 minutes long and it flies by in a blizzard of pleasure.

I knew she was funny but I didn’t know how funny. And obscene. And did I say hilarious? She’s beautiful but she’ll kill me for saying that. At 75 she exhausted me going over her daily routine with her assistant. Book signings, a new play, “A Work In Progress” opening in Edinburgh, Comedy Central Roast, honoring George Carlin at the Kennedy Center for the Mark Twain Award, working the 4,000-seat Foxwood Theater and almost every night working out her material doing stand-up in a little club.

Watch her parry with an offended heckler in Wisconsin. She gets to the core of comedy, of why it matters so much to her and us—if we didn’t laugh, where would we be?

Two events involving Johnny Carson were instrumental in her life. To you youngsters out there who say, “Who?” when I mention Carson, he was the undisputed king of late-night talk as host of the Tonight Show. He could make a comedian’s career just by smiling at him on the couch next to him. The first time she worked the show, he told her “You’re going to be a star”. Her career skyrocketed. The other time was when she was offered her own talk show on Fox in 1986 going up against Johnny. When she called to tell him, he hung up on her and never talked to her again.

In fact, she was persona non grata at NBC until she did the Donald’s “Celebrity Apprentice”, a highlight of the movie dropped in the lap of the filmmakers.

It was brave of her to allow the two filmmakers, Ricki Stern and Annie Sundberg, to follow her around, but she’s pragmatic, tough and protective of her sensitivity to rejection. Her first love was acting. Though her play was a smash in Edinburgh but received lukewarm reviews in London, she stopped work on it immediately because she wasn’t going to get hurt the way she was by the New York critics again.

Great lines tossed off—she introduces her staff, “Staff, I’m lonely. Who’s going to f**k me tonight?” Decades before shock comics she joked about abortion, “She’s had 14 appendectomies (you know what I mean), flying back and forth to Puerto Rico, and she’s walking down the aisle in white? Puleez!” And the bit about anal sex, priceless.

She’ll hate me for saying this, but she is an icon and an inspiration. She killed me with her mouth and mind going a mile a minute.

The filmmaking is intimate but in your face and there’s not an ounce of fat on it. If you haven’t seen it, do so. It’ll blast you out of your seat like a shot of Tabasco.

Representation Without Taxation Can Lead to Calamity

Dennis Berman's article in The Game column in The Wall Street Journal contrasts another time in U.S. history when asset values soared, were leveraged, then went bust. State budgets were in dire straits, just like California and Illinois in 2011, which are seriously discussing defaulting on their debts.

In 1841, 8 states and Florida (which was a territory at the time) defaulted on their debts. Investors were understandably alarmed. Yields for state bonds went from 12% in 1841 to nearly 30% in 1842. "To this day, Mississippi hasn't paid back some of those bonds, even after a 100-year English bid to collect," Mr. Berman wrote.

Those were very different times than we are currently experiencing, with the rise of deficit hawks and the greater influence of Grover Norquist, who founded the Americans for Tax Reform, which firmly requests that all politicians sign a loyalty oath never to raise taxes.

There is a large disconnect between the notion that taxes pay for necessary state and city services and that taxes are an abomination. If state services are maintained, that actually encourages investors to buy bonds because with improved services, the state becomes sustainable and hence, more valuable. This is what happened in 1841, when taxes were raised in the defaulting states:

Leaders and citizens of the 1850s were more willing to accept new taxes to pay for the infrastructure and to defend, in the earn words of the time, their "moral duty" of meeting debts.

Most of the states eventually paid off their debts, and changed their laws to safeguard their finances, helping make U.S. states some of the world's best credits.

Elementary arithmetic. It's better to pay, say, 4.02% (current yield) on a 20-year Treasury bond than a 30% yield.

The railroad boom came along in the 1850s, bringing with it prosperity, which eased the burden on the states.

"People didn't want to raise taxes but they did," says John J. Wallis, a University of Maryland economic historian. "[C]onstitutional laws have made it harder to raise taxes than to raise expenditures," he says.

Unless we as a nation want our states to crumble, we have to have a more sane, less knee jerk reaction to paying for our upkeep.

After all, the Congressional Republicans (and influential outsiders), whose motto might as well be, "Let everyone fend for themselves, unless they have political influence," and who undoubtably intend to veto any bill that might save our states and cities, pushed through a continuation of the Bush tax cuts. As estimated by the Congressional Budget Office (CBO) in 2005 when the cuts were in effect:

In 2005, the cost of tax cuts enacted over the past four years will be over three times the cost of all domestic program increases enacted over this period.

They neglected to include any way to pay for the cuts' exorbitant costs, a breathtakingly hypocritical stance according to their avowed philosophy. From my perspective, their major policy stance is that they intend to roll back all Democratic initiatives. If I were a cynic, I might believe that this was a plan to keep our country in a state of neglect and disrepair heading into the 2012 elections. More from Mr. Wallis:

"There is nothing wrong with raising taxes to support government services that voters want and are willing to pay for," he says. But government needs to be set up "so that both voters and legislatures are forced to make decisions about taxing, spending and borrowing simultaneously."

The Big Picture in Housing Is A Tsunami

Financials led the 1st day of 2011 trading, DJIA up 93 points. In Tess Stynes' article , written with help from David Benoit, Alan Zibel and Bob McGoughon on today's Wall Street Journal website, Bank of America is buying back $3 billion in bad loans from Fannie Mae and Freddie Mac. Is that a sliver of sunshine peaking through the clouds? Or is it just a miniscule drop in the bucket?

Bank of America bought Countrywide Financial, which originated many of the worst mortgages imaginable. Such as, you only have to pay a low teaser rate for a few years then-BOOM-! the interest rates double. Or you pay less than the interest rate (known as negative amortization). Every payment adds to the principal, so you end up owing more at the end than you did in the beginning.

So what are these entitities, Fannie Mae and Freddie Mac? They're government-sponsored entities (GSEs). Fannie Mae was created back in the FDR administration to expand the secondary mortage market by securitizing mortgages in the form of mortgage-backed securities. I've written a lot about mortgage-backed securities (MBS) in the 3 years I've worked on whereiscassandra.

Anyway, by securitizing the loans the GSEs provided more money to lenders, increasing the number of lenders in the mortgage market.

These were good, solid entities for decades. They provided conservative underwriting standards and guarantees that principal and interest would be paid.

But something is rotten in the state of housing cognitive dissonance. Could be due to the hybrid nature of Fannie & Freddie. They are an unholy mixture of implicit (not explicit) government backing of affordable home ownership, which allows them a place at the Fed table for cheap money but they are also answerable to private shareholders. That's not their only conflict: its mission is to provide affordable housing, yet when competition came in the form of private label securitization, they lowered their underwriting standards to keep competitive.

In 2004, the government allowed high-risk loans to count toward affordable housing. The concept was that Fannie and Freddie would police its underwriting standards across the board.

As of 2008, Freddie and Fannie guaranteed 56.8% of the United States $12 trillion mortgage.

But they have HUGE problems. They're zebras pretending to be thoroughbreds. Private label securitization paralyzed them by stealing market share and took them on the wrong path. Let me illustrate with a little graph:

Fannie/Freddie Securitization
Conservative Underwriting Standards-30-year Fixed Rate Mortgages (FRM).

Private Label SecuritizationAnything goes: liar loans, toxic waste, let's get out of here before the house of cards collapses.
Adjustable Rate Mortgages (ARM).

Fannie/Freddie altered its strict underwriting standards to please its private shareholders.

Then the sh***t really hit the fan. People could not pay subprime, predatory mortgages. They couldn't even understand what the fast-talking broker was selling them. Many who were put in subprime ARMs could have qualfied for prime fixed rate mortgages but weren't given that option because the lenders made more with the riskier loans.

Housing prices plunged and depreciated. The unemployment rate went to double digits and is stubbornly staying there. Since Fannie/Freddie guaranteed payment of interest and principal and the money owed on the mortgages they owned was greater than the equity in the house, losses grew and are growing for the GSEs.

In a 7/8/08 article in the New York Times, the dire state of affairs had just begun:

Fannie Mae and Freddie Mac are the nation's largest buyers of home mortgages and traditionally, the government's backstop for the housing economy. But with Monday's plunge, each of these giants has now lost more than 60% of its market value this year. The declines, along with a falling stock market and growing unease about the possibility of more red ink at big banks, reflect a growing conviction consensus among investors that the current housing slump will last longer, and prove more severe, than initally feared.

Representives of Freddie Mac and Fannie Mae declined to comment on their stocks' performances on Monday. Freddie Mac closed at $11.91, the company's lowest [rce soce 1994. Fannie fell to $15.74, its lowest level since 1992.

At end of trading today, 1/3/11, a share price of Fannie Mae was $0.32. That's right, 32 cents. They were delisted from the major exchange in June 2010.

Freddie and Fannie are eager to get banks to repurchase their horrible loans that they sloughed off on F & F. They're poring over their legal guidelines, looking for ways to pressure financial institutions to repurchase the bad loans they orginated and to all intents and purposes insured with F & F.

On the Mortgage Lending News website post "Fannie Mae and Freddie Mac Up Against Bankers' Stubborn Refusal to repurchase Home Loans," Fannie and Freddie are trying new tactics. No more mister nice guy:

Fannie Mae and Freddie Mac are putting into effect agreements calling for banks to repurchase loans that did not comply with the government's underwriting regulations. Byy the end of September, lenders had yet to react to these calls to buy back $13 billion in loans. Freddie Mac has already begun the process to impose penalties for the bad loans, 1/3 of which are 4 months old and older.

But the math will kill you. Fannie and Freddie are costing the taxpayers hundreds of billions in conservatorship. They can dream about getting maybe 5% back. Meanwhile, they're collapsing under the weight of all those bad loans, for which no one took responsibility. which are unaccounted for and which could be utterly worthless. And F & F guarantee 56.8% of the U.S. $12 trillion mortgage market.

What's the endgame? Stop all government spending? Privatize (sell-off) everything? Keep printing money? Is it impossible or desireable to find out through some sort of mark-to-market accounting how many mortgages are dead in the water? Investors in MBS must have some idea. This is asymmetrical information, folks. Some people have a lot of answers and react accordingly. Others are in the dark surrounded by their meager possessions and rapidly dwindling hope. Is it possible to move the process along, with class action lawsuits, etc.?

*Invaluable help from Wikipedia re: GSEs.

The Need for Speed: Brave New World of Trading

Graham Bowley wrote a chilling article for the Sunday New York Times Business section which should give pause to anyone who still believes that stock exchange trading is accomplished by flesh-and-blood traders shouting buy and sell orders in the pits. Uh uh. The new world of trading stocks, bonds, commodities, and derivatives is done by high-frequency algorithmic trading programs talking to each other in huge barns in New Jersey.

Trades don’t take place anymore in the blink of an eye. They take place in a particle accelerator:

Nasdaq, for example, says its time for an average order “round trip” is 98 microseconds—a mind-numbing speed equal to 98 millionths of a second.

So what’s wrong with machines untouched by human hands matching buy and sell orders? Isn’t such innovation faster, cheaper and more democratic? Now anyone can play with the click of a mouse or the tap on an app.

Nothing is wrong if you’re one of the high frequency traders (HFT) that these super-fast electronic exchanges cater to.

Despite its claims of leveling the playing field, this brave new world is funded by a concentrated block of financial institutions. Bowley discusses Direct Edge, an electronic trading platform that is backed by Goldman Sachs, Knight Capital, Citadel Securities and the International Securities Exchange. Its largest shareholder is JPMorgan.

The HFT programs aren’t making qualitative, slooooow decisions based on concerns such as management competency or the future of the new products pipeline. These machines make money zipping in and out of trades taking advantage of very slight discrepancies in prices across all the exchanges. You don’t make a lot from each trade, but ½ cent multiplied by millions in nanoseconds adds up:

By using such techniques, traders make only the tiniest fraction of a cent on each trade. But multipled many times a second over an entire day, those fractions add up to real money. According to Kevin McParland of the TABB Group, high-frequency traders now account for 56% of total stock market trading.

HFT gives almost total advantage to the entity with the fastest machines, which means the entity that can afford to invest in them. Ordinary investors need not apply. Except they are, because they own the assets being traded.

What can go wrong with machines running things without human intervention? Back on May 6, 2010, the Dow Jones Industrial Average plunged 700 points in minutes before prices recovered. This was dubbed the “flash crash.” I remember this well, especially because Accenture, a large global consulting firm, was trading at about $41 a share at 2:40pm. Within seconds, its price was driven down by the “flash crash” to one penny per share.

The Securities and Exchange Commision (SEC) and the Commodity Futures Trading Commission found that the drop was caused by one sale, dropping a $4.1 billion block of E-Mini Standard & Poor’s 500 futures contract into the marketplace. When the sell order came in, it seeped through all the exchanges and “buy” orders plugged into the computers shut down. All the algorithms stopped buying at once, and the market went into free fall. In the past “human” traders might have stuck around to intervene to prevent such distortions simply because they could discern them, wait patiently, scrutinize asymmetrical discrepancies and adjust for them.

The May 6 “flash crash” could be the first of many to come. The system certainly can be gamed:

One debate has focused on whether some traders are firing off fake orders thousands of times a second to slow down exchanges and mislead others. Michael Durbin, who helped build high-frequency trading systems for companies like Citadel and is the author of the book, “All About High-Frequency Trading,” says that most of the industry is legitimate and benefits investors. But, he says, the rules need to be strengthened to curb some disturbing practices.

“Markets are there for capital formation and long-term investment, not for gaming,” he says.

HFT is so fast the supercomputers use a trading technique known as flash orders. This allows them to see the buy/sell orders of other traders before they move onto the wider marketplace where everyone supposedly has access to the prices.

You can’t put the genie back into the bottle. But we can (hopefully) learn from the past.

Greenberg: 2011 Spirit Awards Best Movie Nominee

Noah Baumbach’s recent movie, Greenberg, nominated for the Golden Bear at the 60th Berlin International Film Festival, is brave and prickly. As played by Ben Stiller, Roger Greenberg is not a likeable person. I can’t think of any lead actor in recent memory who doesn’t want to be liked on screen.

He’s not gruff with a heart of gold. He explodes in anger at the very people who care for him. He is not soft and fuzzy. To illustrate, his favorite hobby is writing crank complaint letters to American Airlines about faulty seat buttons and to the Mayor of New York about stopping traffic noise.

Greenberg is staying at his wealthy brother’s home in Los Angeles having just recovered from a nervous breakdown in New York. His brother, who is a hotelier, is off to Vietnam to open another place. Greenberg’s cover story for why he’s in Los Angeles is that he’s a carpenter building a dog house for his brother’s German Shepherd Mahler, but his refrain when asked is that he’s trying to do nothing deliberately for a while. It should be tattooed on his pillow.

Casually dropped into the story is that Greenberg turned down a major record deal 15 years before which altered his life and the lives of his bandmates. His friend Ivan, played by Rhys Ifans, alludes to this when he tells him at the end during a quarrel that he’s finally embraced the life he didn’t plan for. Ivan is a patient, tolerant friend. It takes a lot to anger him, but Greenberg manages.

Baumbach, as director and screenwriter, (his wife Jennifer Jason Leigh, who appears briefly as an old flame of Greenberg’s, co-wrote the story) can capture the slightest nuances, which speak volumes about the characters and their relationships. There are many great lines in the film, but one that stuck with me was, “Hurt people hurt people.” That was also true in “The Squid and The Whale”, as you watched a family fall apart and damage each other trying to punish and heal simultaneously.

Greta Gerwig is yin to Greenberg’s yang as Florence, Greenberg’s brother’s assistant. We meet her as she drives down an LA street questioning the unseen car next to her, “Are you going to let me in?” She runs petty errands for her boss and his wife, picking up his dry cleaning and choosing vegetables at the Farmer’s Market. You see the imbalance and the casual cruelty of her employers as they ask how much they owe her in back pay and she shrugs it off, “About 3 weeks.” She’s an afterthought. In the next scene she’s borrowing $40 from her friend.

One of the reason she likes Greenberg is because he IS doing nothing deliberately. She has a brief affair with him but he is verbally abusive to her. Gerwig is beautiful, touching, guileless and disarmingly honest. She’s not showy. You watch her closely because she moves with ungainly grace.

Greenberg does have redeemable qualities even within Stiller’s crabby shell. He cares for Mahler through a serious illness and at a crucial moment, he helps Greta even as she makes light of a very personal matter.

There’s a scene towards the end where he pontificates to some young callow 20-somethings about their meanness, that they’re all ADD and don’t care about anything, but you can see Baumbach’s true measure of 20-somethings in the portrait of Florence.

Stiller is courageous and believable sustaining Greenberg’s obnoxiousness. You feel like yelling at the screen, especially when he attacks Florence. But he softens just a bit at the end without a false note.

Crumbling Infrastructure Turns Nonprofits On Their Heads

According to Ianthe Jeanne Dugan's article in the 12/27/10 Wall Street Journal, cities and localities nationwide are drastically altering the relationship between government and non-profits such as churches, schools and charitable organizations.

Infrastructure in our cities, states and localities has been allowed to fester to the point of threatening life and limb. Now voters and city governments are going after the non-profits with the theory that "nonprofits are property owners; therefore they should be taxed." This smacks in the face of:

[T]he longstanding tax exemptions mandated by state law or adopted on the theory that churches, schools and charitable organizations work alongside governments to provide services to the community.

In Houston, taxpayers voted 50.9% in favor of a petition drive called "Proposition 1" which approved a measure to allow "drainage fees" to be assessed against non-profits, among other entities.

"We'll defeat this," says David Welch, of the Houston Area Pastor's Council, who plans to lobby state legislators in January. "This is really a tax. It is the first time that churches would not be exempt from property taxes."

At a group called the National Council of Nonprofits, Tim Delaney, chief executive, says, "Governments are taking their public burdens and putting them on the backs of nonprofits, at a time when the demand for our services is skyrocketing."

Other cities nationwide are slapping fees on nonprofits to contribute to city services:

Albany, N.Y., recently passed an ordinance asking schools, hospitals and other nonprofits to contribute to city services. In Minneapolis, residents recently began paying a street-light fee that also applies to nonprofits, which in some places pay fees for elevator safety and fire inspection.

In Houston, the shock at the result of the vote on Proposition 1 was palpable:

The outcome came as a jolt to Greg Meyes, president of the board of the Houston Independent School District, which includes 300 schools. Mr. Meyers says schools will have to lay off 50 to 70 teachers or raise taxes to pay their share--$3 million to $4 million per year.

I've worked for several nonprofits and they were hit very hard by the recent economic downturn. More people than ever are utilizing their services, including those considered middle-class by government statistical standards, those who've lost their jobs and/or their homes or even those who are still working but can't make ends meet.

At a time when voters seem of two minds about taxation, whether tax cuts all the way up the line contribute to the well-being of the nation, or that taxes are so necessary to keep cities from going down the drain, whither go taxes for education?

A Fresh Start

In The New York Times New Year's Eve, there was a story by Miguel Helft that appeared to be a tale of sour grapes. There are these two brothers, see, Tyler and Cameron Winklevoss with almost Central Casting appearance and background: affluent, polite, 6'5", rowed for the Harvard Varsity team, rowed in the 2008 Beijing Olympics, and are currently training for the 2012 London Olympics. Did I mention they're identical twins?

Anyway, they claim that they had the original idea for Facebook when they asked computer programmer and fellow Harvard colleague Mark Zuckerberg to help design a program for an idea called Harvard Connection, later renamed ConnectU. As Mr. Helft writes:

[The Winklevosses claim that] Mr. Zuckerberg delayed work on Harvard Connection, and when pressed for answers, stalled, according to the Winklevosses. In February 2004 he released The Facebook, which eventually became Facebook.

Facebook representatives say that the Winklevosses' idea was merely a dating site.

I don't see what these Winklevosses are upset about. In 2008 they walked away with a settlement of $20 million and $45 million in Facebook shares. Aren't these guys just after a piece of a growing, thriving business with an estimately log-on count of 750 million, with each person spending mucho eyeball time on the site?

They appear to be obsessed with Mr. Zuckerberg. They're feuding with their lawyers who negotiated the original settlement. I guess they're canny computer types, too. They've saved emails from 2004 as proof of ? [Not revealed in story.]

They recited arcane facts about the valuation of private companies and even quoted from the Securities Act of 1934, which they say Facebook violated when it drew up the settlement.

It is hard to estimate the worth of a privately held company like Facebook, but recent trades indicate it's valued at $50 billion, a bright golden target for all comers.

In exchanges that match buyers and sellers of the shares of privately held companies, FB shares have soared to more than $100 in recent trades after adjusting for stock splits.

Facebook has so far fended off the Winklevosses in every court smackdown. Next month the twins go in front of the U.S. Court of Appeals for the Ninth Circuit. If a ruling is disputed in the Ninth Circuit, the parties involved can petition the U.S. Supreme Court. Unless, as the story says, they decide to give up.

As the old saying goes, success has many fathers but failure is an orphan.

Onward and upward!